Is Home Depot Your Next Competitive Threat?

[Michael Hosto]

This was a topic that was discussed a year ago on The Forum.

I was really surprised at what I thought was a little shortsightedness on the part of the industry as or at least that part of the industry that participates here on The Forum.

Many people wrote that HD could never compete with them because their quality for far superior to anything HD could offer.

To those I suggest considering the fate of a home store entrepreneur who had the same feelings about HD 20 years ago or a quality hamburger joint trying to survive next to a Mc Donald’s. It’s almost impossible. American's will settle for cheap, fast and easy. The have no idea it's a mistake until it’s done, and even then they may not know any better.

The Mc Dondald-ization of America has allowed many to do well when they may have failed otherwise however it has taken a huge toll on small businesses that are not apart of franchises (or networks).

I'm often wrong and I'm happy to admit it. Maybe I'm paranoid???
However I think that a huge competitor is lurking over the next hill and we either don't see it or we refuse to admit it.

Consider:
• HD’s limited growth opportunities in the US with new store openings
• Their ever expanding service lines including rental of water extractors, dehumidifiers and drying fans
• HD acquisition of Chem Dry
• The existing and ever increasing relationship between State Farm and HD
• The need for State Farm to have more resources as it loses qualified PSP contractors
• Home Depots huge budget
• Home Depots branding power
• Home Depots proven history of successfully knocking out its local competitors (even big ones).

Is HD a real potential threat to local restorers?

How do you prepare for this?

[Sentry]

All:
Home Depot may become a huge competitor, but I doubt that a big box can manage the large number of small, multiple projects that water damage mitigation requires. My guess is that they will follow the time tested big box principle: get the work and have it done for half price by small, local subcontractors. Unfortunately, both State Farm & Home Depot cannot save the same money. State Farm will contract with Home Depot for the same reason they do everything else; low claims cost and everyone else be damned. Home Depot must then get the work done for about half of this low cost so they can make a profit. It will be very difficult to find & keep subs who can perform to the exacting standards required by State Farm & other insurance programs and still make a profit. In addition, Home Depot's deep pockets will attract litigation like flies.
My guess is that if Home Depot becomes a major player it will be by lowering the bar so they can perform at an acceptable level.
Want to compete with State Farm? Move about 50% of your sales volume out of insurance work. Then only take the cherry jobs that come around that you can perform on & earn an acceptable margin without unacceptable constraints.
My opinion on the huge competitor lurking over the next hill? HMO style homeowners policies that contractually tie the hands of the insured to hire contractors that are in the program & will work for tiny margins.
Just my thoughts.....

Chris Cole, CR, WLS
Sentry Construction Company, Inc.

[emmanuelgpappas]

My feelings about the entrance of Home Depot or any other large company getting into the restoration services field is as follows.
1) It has been done in other areas already...forget it is a specialize field, think in terms of new profit centers for other industries.
2) Think in terms of small firms being wooed by these companies with promises of more work, less overhead, just get into program and we will sale the product for you and you will grow, grow, grow.
3) Think of these companies already supplying our industry with building materials direct to the contractor eliminating contractor's O & P on materials.
4) Think of Insurance Companies who would love to have a one stop shop with guarantee's that their clients would never have to wait to be serviced.
5) Think of mass contracts with equipment suppliers for drying equipment and anything you could possibly need for a job.
6) Think of an organization that can spend millions for the right talent to put this is place

and I think you next competitor could be someone like a Home Depot, Lowe's, Venture capitalist, etc.

So why not think of ways to excel in what we do and have the cutting edge in our networks to help circumvent the probable.

Your thoughts would be appreciated by all.

[Denny S]

I worked for Home Depot for 3 yrs as a project manager for roofing windows and siding.

Home Depot’s profit margin was 47 to 50 % on ever installation.

The way they did it was use many subs and tell them what they were being paid.

I left after 3 yrs because I could not deal with the politics of the higher ups in the company

All they cared about was money they didn't care about customer service they went from a 85 customer approval rating to under 20 last chance I checked. And thier new CEo did a mass apology when he started reciving complaints.

As for them being a threat to the restoration companies there is no way they can compete even having the ties to State Farm
on further note home depot give state farm 2% discount refund every year for the material that the vendors buy from them


And if Home Depot wants to compete in this industry they should buy a national restoration company .

Then they may have a chance.


Look at ServiceMaster being bought this year by a Venture capitalist group

[Huey M]

actually the parent company of HD DID buy a restoration company a few years ago - Inrecon - then sold out a few years later

What have they learned in the last 10 years?

[Denny S]

not a thing

Denny S

[cat man do]

i went to HD today
they now rent
carpet extractors $23 a day
carpet fans $23 a day or $75 a week
Ebac DH's $23 a day or $75 a week

the writings on the wall

[BIG DOG]

But do they train you on how to use them and document the job all the

way to dry standard? I think not. I'm not worried. BIG DOG :roll:

[havingfun2]

They are simply responding to a market that has been created.

(a)Some of it has been nature created.
(b)Some of it has been stock market created.
© Some of it has been restoration contractor created.

I save said it before.

Nature has always created “storms”
(a) Some silly ass humans think they can build in areas that should not be built in.

The stock market was booming, the marketers kept upping the anti on everything covered to compete for your premium dollar.
It had nothing to do with the risk, it had everything to do with the dollar to invest elsewhere.
Have a look at past financials of all the major insurer’s.They where running underwriting losses.

(b)
There was a time ( I called it baby sitting insurance) where insurance companies wrote risks putting what their risk actuaries told them on the back burner because. They wanted the premium dollars to invest in the stock market. It got to the point where people living in 300K houses , driving 40K vehicles and $250 deductibles or less for comprehensive coverage. ( comp means most things are covered). Hence, why I called it baby sitting insurance.

( a bit of a side note, but it does support my “message”. If someone can afford the 300K house and all that goes with it, can afford the 40K vehicle and all that goes with it, why is it such an extreme to think that if someone had a $1000 dollar loss the insurance company should pay?

Insured’s had hired some very expensive “help”.

© Restoration contractors. Sometimes I wonder where this term ever came from.
Do you actually mitigate of the loss first?
Or are you still hung on all the claims money that WAS flying around?
Is your whole biz and practices still geared to the late 90’s and early 2,000s?

It was sweat times for many.
I know, as an insurance broker I saw the “restoration” invoices.
Restoration should have been defined as “rip and tear to rebuild” because O & P was there.
Anyone can do that.



Some national’s has simply caught onto a market change and potential.

Insurance has been cancelled everywhere, customers have HIGH deductables, baby sitting insurance is over for I’ll say 10 years ( it always comes around again)
Will the property owner and renter of this equipment on average dry their structure?
No way.

Do the national renter’s care?
No.

Now we have their credit card and attention, they will be back for the property owner version of rebuild.

Should you care if you still have the overhead of the 90’s?
Better believe it.
_________________
Mark Brisco
Ontario Canada
“With All Thy Getting Get Understanding”

[tylerstaszak]

I view it a lot like Sears being in the carpet cleaning business. Yeah, it's not cool having a big competitor on the block, but if you're smart, well funded, and keep an eye on costs, you can compete.
_________________
Tyler Staszak
Kansas City Carpet Cleaning by Oxi Fresh
http://kansascitycarpetcleaning.blogspot.com/